Australia in News

Rio Tinto Steps up Criticism of Australia Tax Plan

Rio Tinto renewed its attack on the Australian government’s planned mining tax, which it says is divorced from commercial reality, penalised efficient operations and would slow investment and cost jobs.

In a letter to shareholders, Chairman Jan du Plessis said the company supported tax reform that would enhance the competitiveness of the Australian economy, but that the proposed resource super profits tax wouldn’t achieve that.

“The government’s proposal will penalise efficiency, discourage competitiveness, curtail investment and limit jobs growth,” he said. “It has been developed in a vacuum and is divorced from the day-to-day realities of business.”

Du Plessis said the company was particularly concerned at the application of the new tax to existing projects, which he said would undermine the stable tax and regulatory environment needed for commitment to mining projects that could take decades to pay back the investment.

“The government’s current proposals, arrived at without consultation, have now significantly destabilised that investment framework...As a result, there has been a considerable increase in the perceived risk of investing in Australia, threatening to make Australia a much less attractive place in which to invest.”

Australia Named One of World’s Best Property Markets

The Australian property market has been named as one of the world’s best performing on the back of a 20 percent rise in prices in the last year.

The stellar growth in property values was driven by a combination of a 40 year low in interest rates, the increased first home buyer’s grant and population growth, according to a survey of 47 countries by international real estate agent Knight Frank. The survey ranks Australia as the world’s fourth best for price growth.

“With interest rates now rising, the government withdrawing stimulus and the supply response picking up, we expect house prices to slow over the next six to nine months,” Liam Bailey, head of residential research at Knight Frank said.

China was the top performing country with house prices gaining 68 percent in the year to March 2010 with Hong Kong and Singapore taking second and third places respectively.

The entire Asia Pacific region was the biggest grower globally with house prices increasing by 17.8 percent.

Europe didn’t fare so well, dominating the bottom half of the table. Estonia dropped by 40.3 percent in the year to March 2010 with the Ukraine and Lithuania being other notable losers.

House prices in the United Kingdom rose by a less than impressive 8.8 percent for the same period.

However, Scandinavian countries did experience some growth.

“In Europe a positive story has been provided by the Scandinavian countries of Norway, Sweden and Finland. “Here annual growth has hit double digits as housing markets, less beset by currency weaknesses, and debt crisis than many of their European neighbours, has allowed supply shortages to fuel growth once more,” Mr Bailey said.

Knight Frank’s study was based on the Australian Bureau of Statistics’ House Price Index, which critics have claimed overstates property price growth.

Australia Keeps Wheat Harvest Forecast Little Changed

Australia, the world’s fourth- largest wheat exporter, kept its forecast for the next harvest little changed, according to a government agency.

Output may be 22.1 million metric tons in 2010-11, compared with a March estimate of 21.94 million tons, the Canberra-based Australian Bureau of Agricultural and Resource Economics said in an e-mailed report. Production the previous season was 21.66 million tons, the bureau said.

Farmers typically plant winter crops including wheat and canola from April to June in Australia, with harvesting completed by January. Beneficial rainfall in recent weeks had “supported a positive start” to the season, Rabobank Groep NV said in a report last week.

The opening of the winter-cropping season in Australia’s eastern states “is one of the best for several years,” Paul Morris, the bureau’s deputy executive director, said in the report. The forecast output would be a 2 percent increase from this financial year, assuming average yields, the bureau said.

Wheat for September delivery on the Chicago Board of Trade gained 0.1 percent to $4.6775 a bushel at 10:31 a.m. Melbourne time. The futures have dropped 30 percent in the past 12 months amid rising global stockpiles.

Canola production next harvest may reach 2 million tons, the bureau said, raising its outlook from a March estimate of 1.6 million tons. Output last year was 1.9 million tons, according to the agency.

The total winter-cropping area next year may fall 1 percent to 22.1 million hectares, with total winter-crop production forecast to reach 35.1 million tons compared with 35.2 million tons last season, the bureau said.

Australia’s NSW State Expects 2010-2011 Budget Surplus A$773M

Australia’s New South Wales state government forecast an operating surplus of A$773 million for the fiscal year that starts July 1.

New South Wales Treasurer Eric Roozendaal, in unveiling the state government’s budget, said next fiscal year’s surplus is forecast to widen from a revised forecast surplus of A$101 million for the current fiscal year. That return to the black for New South Wales in 2009-2010 comes two years ahead of previous expectations.

The forecasted surplus represents a sharp turnaround for Australia’s most populous state and largest regional economy. In its late 2009 mid-year review, the state forecast a deficit of A$1.02 billion for the current fiscal year as the global financial crisis continued to cast a dark cloud on government and semi-government economies across the globe.

The state, which attributed the improved outlook to fiscal and monetary stimulus, trade links with Asia and growing population, forecast surpluses of A$885 million, A$863 million and A$628 million for 2011-2012, 2012-2013 and 2013-2014, respectively.

The government expects the NSW economy to grow by 3% in 2010-2011 inching up from 2.5% growth in 2009-2010. It also forecast Sydney-based inflation will fall to 2.75% from 3.25%.

With the improved economic position, Roozendaal said the state would continue with its A$62.9 billion four-year infrastructure spending plan that began last year. In addition, the state has committed A$183.9 million in a series of initiatives aimed at addressing a housing shortage.

“We will invest in what is important to NSW families--essential front line services, new infrastructure and jobs--and take NSW forward along a path which is responsible, fully-funded and maintains our...AAA credit rating,” said Roozendaal.

Despite the return to surplus, the massive spending efforts will increase the state’s net debt levels. Net debt is forecast to rise to A$42.6 billion in 2010-2011 from A$36 billion in 2009-2010. By 2013-2014, net debt is forecast to reach A$55.2 billion.

Still, Standard & Poor’s Ratings Services said increased revenue forecasts, in conjunction with the ongoing implementation of the state’s infrastructure plan and a limited number of additional policy measures, will mean that the state is likely to continue to record modest surpluses at least until 2014. S&P said the state’s fiscal position was further helped by the state’s recent sale of a 30-year license to operate NSW Lotteries for A$850 million.

“The budget is consistent with the measures that were introduced in the 2008 mini-budget and the 2010 budget, thereby providing support to the state’s ‘AAA’ credit rating,” said Standard & Poor’s credit analyst Anna Hughes. “Downside potential on the rating therefore remains low.”

Analysts for Moody’s Investors Service added its outlook on the state’s Aaa rating is likely to remain “stable.”

For 2010-2011, the state has allocated A$16.6 billion in infrastructure spending as part of the four-year program.